Business Ethics Case Study: Managerial Hubris and Farrow's Bank

This paper examines the 1920 Farrow's Bank failure, focusing on the role of managerial hubris in its downfall. The case study, evaluated by Thomas Farrow, explores how Thomas Farrow's behavior, power, and leadership style contributed to the bank's collapse. The paper analyzes the impact of managerial hubris on ethical decision-making, the pressures associated with it, and the lack of external oversight. The study uses primary sources to trace the changes in Thomas Farrow's behavior, linking them to the criteria outlined in Petit and Bollaert’s framework for diagnosing CEO hubris. The analysis highlights how unethical practices, lack of accountability, and a culture of neglect within the bank exacerbated the situation, ultimately leading to its failure. The paper concludes that an ethical business culture could have mitigated the hubris and increased the bank's productivity and sustainability.

Running head: BUSINESS ETHICS
BUSINESS ETHICS
Name of the Student
Name of the University
Author Note

1BUSINESS ETHICS
Introduction
The main purpose of this paper will be to address the question related to the case of
managerial hubris of the bank failure in the year of 1920. The overall case study has been
evaluated by Thomas Farrow. Thorough explanations as well as well-supported rationale will
be provided in evaluation of the questions that has been provided with the case study in this
paper. Thus, it can be said that the major aim or purpose of this discussion will be to assess
the extent to which the hubristic behaviour on the part of Thomas Farrow possessed the
contribution to the downfall of Farrow’s Bank in the year 1920.
Thomas’ Level of Managerial Hubris
It can be stated before starting the discussion in this section that power, corporate
culture, leadership and motivation possess an impact in the managerial hubris of Thomas’
level. It has been found by the researchers that the probability of management hubris had
occurred from the external mechanisms of external factors that had occurred in the business
environment of the financial organization. All these factors either lacked the potentiality or
were inefficiently applied. It can also be stated in this context that Thomas Farrow had
already developed a managerial hubris due to granting of the power to him over the entire
business operations of the bank. In this context, it can be said that managerial hubris is the
unrealistic belief which is possessed by the managers of a particular organization or business
house, mainly in bidding companies which helps to manage the overall assets of a particular
targeted company more effectively and efficiently in comparison to the present management
of that organization. It has been found that the culture of this bank was not sufficient enough
or careful enough to continue the financial operations in the market places where they
operated their operations. Some of the board of directors along with the senior management

2BUSINESS ETHICS
of the bank were neglectful and irresponsible in their attitude towards the employees along
with the daily business operations of the financial institution.
This neglect also supported the managerial hubris of Thomas. Apart from this, it has
been observed that the leadership style shown or followed by Thomas Farrow supported the
managerial hubris. He was more involved with his own image than the overall image of
Farrow Bank. Rules and regulations related to the financial operations of were not at all
followed by him and were disconnected from the reality, or the actual occurrences that were
happening in the business environment of the company. He compensated his losses by
providing fake balance sheets and refused to agree his wrong works even after charged and
convicted. On the other hand, the power possessed by Thomas was very high. It got increased
mainly due to ego and selflessness of Thomas. It also got increased due to absence or
inefficiency of the external control mechanism. It can be said here that Farrow’s Bank was
registered under the Friendly Societies Act of 1904, which enabled them to follow less strict
regulations in auditing process than its rivals. The management was less accountable to the
shareholders of the bank, and the internal supervision had numerous deficiencies in the
operations of the bank (Hollow, 2014).
Ethical Decision Making
Managerial hubris damages the principles of an individual in the decision making, as
the individual do not take any help from the external factors that will help to raise awareness
in the context of the imperfections. Thus, the individual is totally unaware about the bias ness
that impacts the decisions which impacts the business decisions. He was concerned with only
one thing, and that was making money by any means. Ultimately, it rebound the greedy
motivations of Thomas Farrow into a destructive managerial hubris (Lentner, Szegedi &
Tatay, 2015).

3BUSINESS ETHICS
Pressures associated with Ethical Decision Making
In this context, it can be said that the pressures that are connected with ethical
decision making process at Farrow’s Bank could possess extreme difficulties for the
employees. But, on the other hand, there was no pressure for Thomas Farrow due to his pride
and confidence. There was not any presence of external forces like government regulators for
financial institutions like banks at those times that would have helped him to realize that he
was answerable to the employees, government and customers. He had lost all the ethical
safeguards with the power possessed by him.
Evaluation
It can be said that ethics plays an integral part in determining the rate of success of a
company. The level of managerial hubris has been definitely decreased in case of following a
truly ethical business culture by Farrow’s Bank. The chances of understanding the benefits of
shared decisions would have been increased and helped to conquer the hubris syndrome. An
ethical culture would have helped to increase the productivity of the organization and making
it more competitive and self-sustaining (Hollow, 2014).

4BUSINESS ETHICS
Reference
Hollow, M. (2014). The 1920 Farrow's Bank failure: a case of managerial hubris?. Journal of
Management History, 20(2), 164-178.
Lentner, C., Szegedi, K., & Tatay, T. (2015). Corporate social responsibility in the banking
sector. Pénzügyi Szemle/Public Finance Quarterly, 60(1), 95-103.